Good morning,
Integrity is not a word often associated with Iran’s current regime—and this morning’s modest decline in futures (~0.50%) reflects more resignation than surprise. The Strait of Hormuz was closed less than 24 hours after an agreement to reopen it. Markets have seen this movie before. It will likely reopen again relatively soon—but not without cost. A difficult backdrop to invest in, to say the least.
While all eyes remain on the Strait this week, markets will do what they do—trade—and the data will continue to flow. This week’s releases should help clarify how households and businesses are navigating higher energy costs, partially offset by a boost from larger tax refunds.
March retail sales (Tuesday) are expected to show a solid headline gain, though much of that strength is likely tied to higher gasoline prices and a pickup in auto sales. Beneath the surface, the picture is more subdued. Core retail sales likely grew only modestly and, when adjusted for inflation, may have declined—suggesting that higher energy costs are beginning to crowd out discretionary spending at the margin.
On the business side, inventories (also on Tuesday) likely rebounded in February, driven by wholesale restocking following the holiday drawdown and expectations for improved demand. That optimism may already be fading. The war with Iran—and the uncertainty surrounding it—raises questions about how sustainable that restocking trend will be, particularly as input costs rise.
Elsewhere, initial jobless claims (Thursday) are expected to tick up slightly but remain at levels consistent with a stable labor market. Consumer sentiment (Friday) may edge higher in the final April reading, supported by firmer markets and some hope for reduced geopolitical tensions.
Bottom line: the data should continue to point to an economy that is expanding with a labor market that remains intact—but with early signs that higher energy costs are beginning to weigh on the consumer. For now, it remains a story of moderation, not deterioration.
Be well,
Mike